German labour market feels winter chill

Unemployment in Germany edged higher in March as the labour market felt the chill of the long and cold winter weather, official data showed on Thursday.

In seasonally-adjusted terms, the jobless total rose unexpectedly by 13,000 to 2.935 million in March, according to data published by the Bundesbank, the German central bank.

Analysts had been expecting no change in the seasonally-adjusted jobless total.

At the same time, the jobless rate – which measures the number of people registered as out of work against the working population as a whole – was unchanged at 6.9 percent.

The federal labour agency in Nuremberg, which compiles the monthly unemployment data, nonetheless insisted that the job market "continues to be in good shape."

The agency focuses on raw or unadjusted numbers, which actually showed a fall of 58,400 in the headline jobless number to 3.098 million, while the jobless rate slipped to 7.3 percent in March from 7.4 percent in February.

Labour agency chief Frank-Jürgen Weise explained that the decline was due to the usual spring upturn, but he noted that the upturn was smaller than usual for this time of year.

Analysts suggested that the long and cold winter was to blame.

"The harsh and long winter is hurting Germany's labour market," said Berenberg Bank economist Christian Schulz.

"But the increase in unemployment by 13,000 in March will probably remain a temporary blip," he insisted.

And while the pace of job creation would likely slow noticeably over the coming months, it would be "followed by a rebound in the second half of 2013 if Europe manages to keep a lid on the euro crisis," he said.

"The job market may not be quite as buoyant as in the last couple of years with hiring intentions easing. But it remains very healthy. High job security and rising salaries should support consumption and thus domestic demand," Schulz said.

Earlier, retail sales in Germany surprised to the upside last month, rising modestly after already clocking up strong gains the previous month, according to Destatis, the federal statistics office.

Natixis economist Johannes Gareis said he was also wrong-footed by the rise in the jobless total this month.

But "today's data do not contradict the view of a solid German labour market, defying the sustained weak economic performance of its neighbours. We expect the German unemployment rate to remain close to a post-reunification low at 6.9 percent in 2013," he said.

Newedge Strategy analyst Annalisa Piazza put the blip in the jobless numbers down to "the recent renewed pressures of the eurozone debt crisis in March" as businesses became more cautious in their hiring plans.

"Companies are sceptical about creating new jobs in the current uncertain environment," she said.

But Jennifer McKeown at Capital Economics was pessimistic.

The unemployment data "brought more evidence that the impressive labour market recovery is petering out, with the number of unemployed in Germany rising for the ninth time in 12 months," she said.

"In all, while a relatively robust labour market and the strong state of households' finances should allow German consumer spending to expand modestly this year, we think that those still waiting for a strong consumer revival are likely to be disappointed," McKeown concluded.